The Future of DAOs and Decentralized Investing with Ian Lee & Will Papper of Syndicate Protocol

Bitcoin, a financial protocol built on blockchain technology, emerged in 2009. Depending on your definition of the term, this was also the birth of decentralized finance (DeFi). However, in 2017, MarkerDAO launched, a turning point for more complex decentralized, blockchain based financial applications. This marked the start of the DeFi revolution and the birth of a more open, transparent and inclusive financial system. In this episode of The Money Movement, we cover on-chain governance, the configuration of DAOs, participation in the crypto economy space, and much more. 

Joining us this week to explore this topic is Ian Lee, Co-Founder of Syndicate Protocol. 4 years before, he worked in a venture capital firm that was backed by IDEO and focused on investments in Web3 startups. We are also joined by Will Papper, Co-Founder of Syndicate Protocol, who also worked at IDEO's R&D network at IDEO CoLab in 2018.

Listen today to learn more about the future of DAOs and decentralized investing!

Jeremy Allaire: Hello and welcome, everyone, to this episode of The Money Movement. We're talking about DAOs, Syndicate DAOs, investment clubs, the future of corporations, on-chain governance, and so much more. Really thrilled to have a great duo here, co-founders of Syndicate DAO, who had a big week this week. We're going to talk about that and talk about their recent launch.

I've had a chance to get to know Ian and Will a bit over the past year or so and, further, have just found them to be some of the brightest minds in thinking about this emergent landscape of how DAOs are configuring, how people participate in the crypto economy and in projects and ideas, and NFTs and culture and so much more. It's really great to have you guys on, so welcome.

Ian Lee: Thanks. Thanks for having us, Jeremy. I think last time, at least I was on here with Balaji on DAOs, probably six months ago at this point. I think a lot happened since then. We're excited to share some of the learnings that we've had since then.

Will Papper: It's really fantastic to be here.

Jeremy: Awesome. Maybe just starting at the top a little bit, just talk a little bit about the project and the vision you had behind it and how it formed. Like you said, I think last time we were talking, these were clearly ideas that you were thinking about if not actively working on, and then things have emerged a lot. Maybe just founder story for a few minutes on how Syndicate came to be.

Ian: Absolutely. Will and I met when we were working at IDEO's crypto lab four years ago and this was in 2018. Before NFTs really had its resurgence, obviously, before DeFi really caught on, Will and I were studying back then was, what we're going to be the applications of decentralized social networks in particular? What we ended up learning in designing a decentralized social network was that the primary application for a decentralized social network was for the purpose of decentralized investing and democratizing the investing model.

Will and I scratched our heads back then in 2018. We looked at that and we were like, "That's really interesting," like, "Whoa," and the infrastructure is not really ready for that. If you think back to 2018, that was just after ICOs in 2017 and well before DeFi. We came to the conclusion that the timing of the idea that we had conceived at that point in time was actually too early. There were things that needed to be built before the world was ready for something like that.

Now, fast forward four years after all these amazing primitives from DeFi came out in 2019 and 2020. Will and I started looking at some of these primitives. We started realizing that if you took a few of them and you mash them up and then mash them together with the social networking protocol that we had conceived, now we had something that was actually ready for the market. That is what led to us working on that again. It ended up evolving and becoming Syndicate, which we then formalized as a company in early 2021.

Since forming a company in which we went from two people in March of 2021, just me and Will, now we're over 30 people across almost all functions of the company, are building out infrastructure effectively for Web3-native investing. The product that we launched earlier this week was the very first product that we've launched now in open beta, which are Web3 Investment Clubs. We're really excited about that and all of these other products that we currently have in development, which, in the show, we'll get into more deeply.

Jeremy: Yes, there's a lot to break down there. Some of the bigger themes I'm interested in are, what is your vision for what DAOs can be and what they can become? DAOs as investment clubs is, obviously, a really powerful idea and one that I think you're breathing a lot of life into and solving a lot of the fundamental problems and doing that easily and doing that safely and doing that legally as well, which we'll touch on in a few minutes.

When you think about what's being built here and these emergent forms of cooperation and coordination of capital, it strikes me that these are sort of nascent forms of corporations. There's obviously LLCs. There are different types of corporations. You're obviously leveraging some of those legal frameworks as well as you think about this. Ultimately, people coming together with a common purpose, with the goal of creating something or organizing something or building something. I'm interested in, from a long-term perspective, where you see these building blocks going.

Will: Yes, absolutely. We've been tracking DAOs for the last half a decade. I invested in the original DAO in 2016, which had great ideas, did not work out the way people expected. The new ways to organize society are really exciting for DAOs. DAOs and the Ethereum Whitepaper were inspired by a book called Daemon by Daniel Suarez. In Daemon and the follow-up book, Freedom, it really paints DAOs as these radical tools for a more cooperative society.

There's some good ways to apply that like, for example, it's a society of radically more ownership by the people and by groups instead of by social status. It's also a society with radically more conflict because the decentralization in that case does lead to more tensions and more conflict in society as a result. I think that DAOs are a tool that's as revolutionary as the corporation, but the world hasn't really caught up to what that means yet. Right now, DAOs are very skeuomorphic.

The idea of a DAO is modeled after the idea of a corporation when, in reality, the new cooperative layer provided is completely different. I think that what we'll see is DAOs will start to get more and more specialized. DAOs will start to bring in more and more experts. DAOs will start to delegate more and more governance to people who have deep backgrounds in an area. As a result, this deep decentralization allows the hole to be far greater than the sum of its parts. That's incredibly exciting.

Jeremy: It really is. I think if you go back in history and you look at the political and economic history, you look at even the birth of Marxism and some of the ideas that emerged around the Industrial Revolution. How does capital get organized? How does labor get organized? There were, I think, huge movements around democratic participation in the workforce. Obviously, that took different shapes in Western society.

I actually was very, very interested for a long time in some, for the turn of the century, I guess the last century, ideas around syndicalism. There's a whole school of thought on anarcho-syndicalism that emerged, which was really a vision for cooperative forms of economic organization but where the syndicates or the syndicalist movement could connect to each other in bigger and bigger forms and, actually, could ultimately help to collaborate on organization at a larger scale, even at a potentially national or global scale.

There were experiments in this in parts of Europe and in Spain. Things took a different turn. The joint-stock corporation, capital markets as we know them, and state capitalism really emerged as the primary forms in a lot of places. It's been interesting to watch. I think one of the things that's so interesting about crypto is it's really creating new material to work with. It's leveraging the inherent global connectivity of people everywhere. Then it creates this basis for economic coordination and cooperation and institutionalizing it.

I mean that in the best of ways, not in the worst of ways. It strikes me that DAOs are-- in some ways, they can be used for a lot of different things obviously, right? It is these building blocks to higher-order forms of economic coordination that can take place. It's happening on a global scale, very, very interesting, without, necessarily, a clear legal framework around it.

Because of the assurances that we get from blockchains, it's something that people inherently understand they can trust. They can trust this infrastructure for whether it's making a decision or removing value or things like this. Deeply profound and it's cool to hear you talk about your own tracking on this. I think it's one of the things that I think I'm really excited about. Maybe that brings us back to what you guys are building today, which is, clearly, you're inspired by a lot of ideas.

As I know, as an entrepreneur, you're going to have a long-term vision. There's just a lot to do and so you have to pick a place to start. What led you to start with the MVP product that just came out? Why is that the magic product right now? Why do you believe that that's going to have the product-market fit that you expected to have? What led you to that as the starting point for executing your vision?

Ian: That is the big question, which is not actually so much like where we're going ultimately, which we do have a strong opinion about. It's like, what are the right sequence of things, products, tools, infrastructure that we need to build and in what order do we need to build those things to get to that end-state vision? The only way that we know how to do that actually is to work with users.

That's what we've been doing actually through most of 2021, was once we formally started the company and started building some of the original infrastructure like the protocols and applications, we started putting it in the hands of different communities, whether they were VC funds, angel investor groups, friend groups that know each other and are buying NFTs together, or even like DAOs themselves.

We started doing that, actually, throughout the middle and end of 2021. We learned a bunch of things from that, namely, that a lot of these, I guess, applications as it relates to investing DAOs, which is what we are initially focused on where they want to connect with the real world and, therefore, need bridges to the traditional world or Web2 world. We actually ended up finding that most of those applications and those use cases really struggled to get off the ground.

I think one of the learnings from that was that in the same way that Syndicate couldn't have existed a few years ago because the Web3 infrastructure wasn't ready for it, we think that same thing is true about Web3 to Web2 bridges. As a result of that insight, we ended up narrowing our focus and sharpening our focus more and more to really Web3-native investing. What does that look like? Where are the use cases?

Where are the applications where they live completely 100% in crypto, they invest via crypto 100%, and they distribute in crypto 100%? That led to a few different possible applications. Some of those included community raises and things like Web3-native, SPV vehicles, for example. The one that our customers and these communities kept on pulling us towards were these effectively group chats that started a DAO between their friends and were investing together and NFT assets, tokens, startups, or even some assets in the real world.

We started seeing this pattern towards the end of the summer of 2021. We then researched that really deeply and realized that investment clubs, as they are known in the traditional world, was actually one of the first mainstream consumer applications, Web3-native consumer applications, that would really increase radically access to the core investing tools that we are building to as many people around the world as possible.

That's one of our key missions, is to really democratize investing to as many people and as many communities who need it and deserve it the most as possible like really amazing groups like Komorebi, which focuses on women and non-binary founders, and many, many more groups like that. Once we came to that realization, we basically focused 100% of the company on building our protocol and the application to support Web3 Investment Clubs.

That is the product that we've been refining with over a dozen customers and private beta over the last number of months. We then got that to a place where we were ready to launch that in open beta. Between the private beta and what we launched this week is that we add a number of features based on customer feedback that they wanted to really do two things.

Make those Web3 Investment Clubs as capable as possible in the Web3 world and to the extent that they needed bridges to Web2, we found the key things that they needed and wanted to give them as much ability to maintain compliance, and also develop or have a peace of mind with respect to how they're operating this thing as it relates to regulations, particularly in the US. That's what we've been focused on building before publicly launching and making it available to anyone basically.

Jeremy: I want to dig in. I think it's so interesting that the concept of bridging from Web2 to Web3 or whatever the right metaphor is, we've thought about that a lot. Even USDC itself is an example of like, "Okay, you've got a compliant electronic money system with its rules and regulations and supervision and all this. How can you take that and to 'untether' it," no pun intended, "and imbue it with the capabilities of public chains and all the flexibility that comes with public chains for value exchange transactions, global interoperability, all these really, really powerful programmability, et cetera?"

These things that are out there and finding that way to create that trusted bridge in a sense, I think that unlocks a lot of value in a lot of spaces here, whether that's IP that's being tokenized through NFTs or lots and lots of examples obviously. You're doing that in a sense to these particular kinds of-- let's just call them corporate forms just for a moment. I realize the semantics here, but that are about people coming together to organize, to invest together, and do that with some common purpose.

Let's talk about the underlying legal edifice, if you will, that makes this possible because I think that's a really critical thing. I think a lot of people are like, "Hey, I'd like to get involved in DAOs. I see this ConstitutionDAO." I know that's a habit to have a lot of hype around it, but there's a lot of these clubs around NFTs, other areas. People are like, "How do I do--" Some people are just doing it and a lot of people are just doing it. If I'm interested in starting one of these, how do I know I'm doing it right? Then maybe that's a great segue into, how do they do it using Syndicate? Because you've really tried to make this as turnkey and simple and safe as possible.

Ian: I'll talk about the application for Syndicate that we've launched on Tuesday, but Will can probably talk about some of the more complex styles that we're working with because those structures and setups take pretty different approaches, I guess, to the product that we launched this week. As it relates to investment clubs, let's look at what's happening today or historically.

It's a group of friends on a Telegram chat, a WhatsApp group, a Discord channel. They tend to know each other well. They may be co-investors together. They may be angels themselves or founders or creators in the NFT space, right? They invest together already just individually. What we've been finding for quite some time is these groups actually just say, "Hey, let's invest together. It's just easier that way. We can streamline things and whatnot."

What's happening or has been historically happening is one of two things. Either they basically set up a multisig wallet or they just even use one of their own wallets. They just pool capital together into one of those wallets and they start investing together, which doesn't have much in the way of additional tooling that helps them run that pool of capital more efficiently or better, right?

The other option is that they can snap together a bunch of DAO tools that exist out there today and Frankenstein in a way like a DAO for their group chat. That's a lot of work. In some cases, they actually need to deploy their own code and stuff like that, which is pretty difficult for the average person or just too much work, right? What does Syndicate's investment clubs do? It basically makes that a really simple user experience to the point where it's as easy as starting a group chat.

Obviously, with Web3, there's a few nuances in terms of deploying or creating the investing DAO or the Web3 Investment Club on Syndicate, but it's really straightforward. You just interact with our application, the smart contract. The application and the smart contract do all of the heavy lifting. What it basically does is Syndicate transforms any Ethereum wallet, whether in multisig or just a Ledger or a MetaMask or something like that.

It transforms any Ethereum wallet into an investing DAO on Syndicate. What that means is it adds all of these superpowers like, for example, managing deposits in automated cap table, which Balaji recently published this post about mirrorshares and mirrortables. We've implemented that. Basically, when people deposit into an investment club, the smart contract automatically issues mirrorshares back and automatically manages a mirrortable, i.e., a cap table.

That on-chain cap table can be used downstream for automating distributions in a single transaction, not like sending 90 transactions to all the people in your club. Then in addition to that, we've added a real-time dashboard, the ability to what we call annotate transactions and add metadata about off-chain investments or expenses maybe that the Web3 Investment Club incurs.

Then as I mentioned earlier, we very thoughtfully figured out ways to bake into the tool like key Web2 tools or Web2 bridges, where it helps with legal maintaining compliance and things like that. In particular, we worked with Latham & Watkins to develop standard templates for investment clubs on Syndicate, so people can automatically and very easily generate template documents that people can sign with the Web3 wallet before joining DAO if they want to have that additional legal protections.

Then we've also partnered with a fintech startup called Doola to enable DAOs on Syndicate to create legal entities, get bank accounts, file taxes, and all this stuff if they want that. It's really like an end-to-end-- Obviously, we didn't build the whole thing because we're partnering with others, but it is like a Web3-native tool that has where people wanted some of the Web2 bridges to ensure that them, their DAO, and their members are adequately protected because that's what we think needs to happen for this to go mainstream, is that people want that peace of mind. We want to make sure that we're providing the tools necessary to ensure that people actually know what they're doing and protecting themselves.

Jeremy: It's super exciting. I guess one of the natural follow-on questions is I think there's lots of analogies to what I like to call long-tail markets on the internet, long-tail advertising, long-tail content, long-tail commerce, these multi-sided marketplaces where it just widens the amount of participation on a massive scale. I think what you're doing has the potential to really widen at a massive scale, the people who can intentionally come together to figure out how to invest.

When platforms like YouTube emerged or, eventually, TikTok or whatever examples you want to use that widened participation in both creation and curation and other things, it created completely new industries and scaled out opportunities in ways that just were not fathomable, right? Today, if you think about institutional private equity and private capital and so on, it's hard to penetrate, right? If you look at the total number of venture funds and the amount of capital investment, it's still not wide participation.

Talk to me a little bit about what you're excited about. What are you excited about people doing with this? What are you imagining people are going to do? I think, obviously, you've got your core cohort of customers that are launching with you and you don't know what people are going to do. When you have this level of openness and democratization and access, creativity flows and people just start doing amazing things. What do you dream of? What do you dream of people being able to do with this?

Will: Yes, absolutely. We're incredibly excited about the potential as more and more people start to use our investment DAOs because they are so much easier, cheaper, and faster to set up, but it is truly disruptive compared to the old ways of coordinating capital. One analogy we use a lot is we hope to do to the venture investing industry what YouTube did for film and media.

Jeremy: Totally.

Will: All film and television looked a certain way and it had a certain format. It was very standardized because there were lots of gatekeepers in the distribution and it was very expensive to produce. It was very time-consuming to produce and no one could have predicted what the content on YouTube would look like. It all came out of lowering the cost and increasing the speed to create it and increase the distribution. We've started to see people use it in really, really interesting ways already.

There are people using it, for example, to do everything from coordinating among friends to buy an NFT to coordinating thousands and thousands and thousands of people to set up not-for-profit organizations that are in the media space, for example, all the way to the more standard investing DAOs that you'd expect to see. For example, groups putting investments into startups or groups doing joint investments and tokens.

I think that the way we see Syndicate as a primitive is that, at the end of the day, all DAOs are, in some capacity, investing DAOs because, fundamentally, every form of finance and every form of holding an asset is, in some sense, a form of investing as well. We're really excited about what we're enabling with data tooling and just like how DeFi unlocked incredible things by providing financial composability. DAOs, we see in the same way as unlocking organizational composability. The way that DAOs layer and create community DAOs, investing DAOs, subDAOs is just absolutely mind-blowing to watch and we see it happen in real-time.

Jeremy: Yes, you can totally see how this could proliferate incredibly fast. The accessibility of this globally is really, really profound. One of the eye-popping clickbait-- [chuckles] It's clickbait. Some of the eye-popping stuff is a DAO was formed to buy a golf course, a DAO was formed to purchase this constitution, dah-dah-dah. Obviously, we know a lot about NFT-focused investment DAOs and things like that. How much do you think this is going to get used for bridging to the real world?

I mean, whatever. "Real world" is a wrong phrase. We're all living in the real world. People coordinating capital to invest in property, to invest in cultural artifacts, to invest in franchises, brands, all these sorts of things that, historically, had been very, very difficult to do at scale. How much do you think it gets applied there versus digital-native tokenized assets, whether they be NFTs or digital tokens that are native to, say, protocols on blockchains or things like that?

Will: I helped run compliance for ConstitutionDAO and got them through Sotheby's KYC process to the point where they could place a bid. We also helped CityDAO incorporate in Wyoming, which bought land in Wyoming. The first step was to own land. I think that real-world asset purchases are definitely popular right now and they are important.

We're working with a number of DAOs that are seeking to provide more democratized ownership of really important artifacts, whether those are historical documents or collectibles or other items that are important and hold a lot of sentimental value to people. As soon as you start to touch those assets, the compliance requirements get so immense that it stops a lot of DAOs in their tracks. The number of people who have experienced buying real-world assets via DAOs is, probably, a significant percentage of them are on this call right now.

Jeremy: [laughs]

Will: It's something where there is such a big gap between what crypto enables and what the physical world denies. I think that it will take a while to bridge these things. We're working on making this easier for sure. We have some incredible structures that we're designing that allow people to do these kinds of purchases easier than ever before. At the end of the day, it's still hard to place a bid at Sotheby's or buy land in Wyoming. We can only make that process so easy compared to the DeFi and NFT space.

Jeremy: Clearly, you're taking away a lot of friction for a whole bunch of things and, in particular, by reducing the friction for the participation in natively digital assets. That's obviously where you can get the highest velocity and growth and activity instead of swimming upstream, but obviously with eye towards that. YouTube's a great analogy, I think, because entirely new categories were created that didn't exist and that's okay, right?

Eventually, I have YouTube TV and I have watched live CNBC or whatever it is. They've repackaged the old and synthesized it and made it all work and everything else. It's an analogy, I think. Really works well for long-tail concepts in general that the internet's been so good at. That's super cool. Maybe just shifting a little bit to talk a little bit about the protocol itself. What's the app, what's the protocol, and how do you envision other people building apps and services on top of the protocol itself?

Will: That's fantastic. This is the first time we're mentioning this. Definitely, some real alpha leaks here. Thanks to your fantastic questions, Jeremy. At the core, Syndicate DAOs are composable with the rest of the ecosystem. That's something we care a lot about. Our investing DAOs are ERC-20s. Our community memberships are ERC-721s. We care a lot about the fact that you can set up on Syndicate DAO and then plug in any governance tool you want, plug in any wallet you want, plug in any other tooling.

Likewise, groups can form anywhere they want and then come to Syndicate for help and many do. As soon as things get more complex, they turn to us because we're experts in anything that's more complex than the crowdfund. The exciting part about this composability is we've actually been developing out an entire third-party developer architecture, which will allow anyone to customize the DAOs that they launch.

We have done custom work for groups where we've gone from idea to implementation in 24 hours for a new DAO type, thoroughly tested, formally verified, really, really top-notch security practices in under a day because our architecture that we've spent a long time designing has made it so easy to plug in these custom DAO components for who can meet in a DAO, who can transfer in a DAO, who can burn in a DAO. We have all of that configurable for third-party developers, so anyone can plug in their own architecture in around 50 lines of code or fewer. 50 lines of code is the most complex case. You could do it in 10 if it's something simple.

Jeremy: Is that documented and out there today or not yet?

Will: This is the first time we're talking about it.

Jeremy: All right.

Will: It's something that we're working on documenting because we know we can't do it alone. We want to. We spent a ton of time making it as easy as possible to set up a DAO, no matter the complexity of the use case. We know that people want lots of customization, so we want to empower any developer to be able to build on top of Syndicate. It's not quite ready yet for external use, but it will be in the coming months. We'll keep on opening up more and more.

Jeremy: Very cool. One of the things we love to watch with USDC is just-- It's, obviously, a simple interface for people to implement. It's just incredible to see what developers are doing just with programming all kinds of things on Ethereum and other chains too like Solana. We're seeing a lot of really interesting activity. I think these building blocks as you said, as you were thinking about these ideas a while ago, certain things needed to exist. They needed these preconditions. These Lego bricks as it were started to emerge.

Obviously, USDC is probably pretty useful for you guys as something that can be used. I'm actually interested in getting maybe a little bit more of your thoughts on the broader DAO tooling ecosystem. I think it's obviously very nascent. There are certain things that have emerged that have de facto usage because they've been tried and true and tested like Gnosis, say, for whatever it is. There's a lot of things like that, but it's all really, really new. Now, all of a sudden, people are realizing how significant the scale of the opportunity is.

I don't know how many startup things that are happening we don't even know about or maybe you guys know about everything because you're everywhere. There's a lot of activity here. What do you think are the hardest problems to solve right now? Just looking at everything from coordination and voting and governance and treasury management and security and all these sorts of things, what do you think are the big parts of the surface area that are out there that are opportunities for people to innovate around?

Will: It's always funny the way crypto moves in cycles. We've seen three different eras of DAOs. I don't know if we can really call the first one an era, but the DAO in 2016 was the first DAO out there. It was something that had a very specific purpose of investing together in the Ethereum ecosystem. It was the first investing DAO. That didn't work and it fizzled out. Then in 2017 to 2018, DAO cohort was extremely different because a lot of it was heavily developed.

During the same time, DeFi was developing. In that era, we see Gnosis and Moloch as the two primary primitives and those are highly generalizable. They can work for basically anything. They're not opinionated. They are super general and super flexible and super composable. That's really powerful just like a DeFi introduced really powerful, composable primitives. Gnosis and Moloch did that for the space as well.

What we're starting to see in the 2021 to 2022 wave of DAOs is a return to the vertical-specific DAOs that the DAO kicked off in 2016. Syndicate is laser-focused on investing DAOs. That's what we care about, that's what we're focused on, and that's the experience we want to make really, really great. We really respect the work of so many companies in the space. Mirror and Juicebox are doing an excellent job with crowdfunding. They really make it very easy to set up and get started and raise money for anything you'd like.

Likewise, PartyDAO and Koop are doing really great work and collectively buying NFTs, where it's fractionalizing this asset and co-owning it together. I think that the real opportunities are basically looked at a vertical and see if it's easy to do with the DAO. If it's hard to do with the DAO, that's probably a good business if you believe DAOs are the future. If DAOs aren't the future, then we're all kind of screwed.

If DAOs are the future, then that's a really good opportunity. We know of groups, for example, Utopia Labs, making it easy for DAOs to pay people because that's a very difficult task when you don't have a standard corporate entity. There's a number of DAOs looking at treasury management because instead of holding a bunch of cash, they're often holding the native token. They're really desperately looking for USDC to be able to survive just in case there's a downturn as a rainy day fund.

More and more of these verticals are popping up. You're now starting to see contributor management tools like coordinating station, which are trying to reward contributors in proportion to their work. You start to even see project management tools like Clarity and Wonderverse that are allowing people to coordinate in DAOs better. If DAOs are the future, there's going to be an incredible suite of tools ready to support them.

Jeremy: Totally.

Will: If DAOs are not the future, it was a really fun ride anyway.

Jeremy: I know where my bet is.

Will: [laughs]

Jeremy: One area I'm pretty interested in, which I think people often ask me. When you have something like USDC and you have programmable dollars on the internet and programmable money and how powerful that is, people have a hard time like, "What can I do with that that I can't already do?" It's the natural question that people ask. I start to rattle off different examples and stuff.

My general answer is like, "We actually have no idea." There's so much creativity that's going to happen. We just can't imagine what you can do with internet-superpowered money and programmability. It's just so, so new. One of the things that I'm really interested in is, essentially, labor market protocols, protocols that are constructs for labor and work. It seems like a space that would be really, really ripe for innovation.

If you could come up with really interesting labor and work protocols that then people could compose and integrate and build on, it would be a natural thing to complement DAOs. It's really different than just payroll. It's a broader set of constructs in terms of the different forms of relationships that people can have to entities and each other and how to manifest that and mediate that and so on.

Anyway, that's just, whatever, a little tidbit for anyone listening. I'm very, very curious to see what emerges in this whole space and category. I guess maybe the last question, which is just looking out a little bit, your starting point. Give me your three to five-year vision. What do you imagine is happening and what does the world look like? How has this kind of infrastructure changed the way that economic activity is coordinated and supported?

Ian: Actually, maybe bridge to an idea that, Jeremy, you were just sharing around like labor protocols. One of the things that Will and I and the team had been thinking about in the middle of 2021 is like, "What are DAOs actually as a technology?" In the same way that people-- I think there's still quite a bit of misunderstanding of what NFTs actually are or even what DeFi was, which I think people now grok that.

DAOs are still very new as a technology concept. What we came up with was that DAOs are actually financial social protocols. They are protocols for more efficiently coordinating human beings and financial capital on the internet together seamlessly. When you think about it from that perspective, there are so many applications of that. In that context, actually, if Syndicate is building infrastructure for Web3-native investing, it even made us start to ask the question, what do we mean by investing?

Is that actually purely financial capital or do we also mean investing people's time, talents and resources, and labor? I think that that's something that we're already pulling the thread on. If I were to project out three to five years, whether it's Syndicate or other teams, many of which Will had mentioned, I think that's where this technology is ultimately headed, which is, again, coordinating human and financial capital on the internet in totally new ways and because it's 100x, 1,000x more efficient, but also because it's composable.

These DAO communities are composable with one another. You can now take these effectively social graphs that are being created by DAOs and the composability of them. Those are going to unlock fundamentally new applications, new experiences, and likely new economies in the next five years that are going to pop up. We have to find the industrial model and turn it into something very, very different, so that's something that I see at least in the three to five-year time frame.

Jeremy: Awesome. Will?

Will: Yes, I think that the enthusiasm has gotten ahead of the reality right now. Anyone who's run a DAO knows that the rhetoric around DAOs is that DAOs are this magical organizing, coordinating force and that you add a DAO and, suddenly, so much is handled by a community. You can really leverage the incredible people around you and build great things together.

The reality is completely the opposite. When you add a DAO, you've just made your life 10 times harder. Because now, instead of having a small group of people doing a very focused thing, you have a large group of people doing very similar things who are not necessarily coordinating. I was very involved in the early days of Loot. There were three different groups working on what they believe was the first game for Loot.

In a small group, they could combine their efforts and they could build something together. In a DAO, they don't really know what anyone else is doing. A lot of the burden shifts to community management and managing governance processes, but what you get in exchange for making your life a whole lot more difficult is much greater trust and much greater shared cooperation and, in many cases, shared ownership.

Essentially, what this leads to is you were trading some short-term pain of coordinating people for the long-term gain of having far more supporters in your corner than ever before. If Uber, for example, or Lyft had been able to give equity to their drivers, I think they would look significantly different. They would have made it through the bad times much more easily if then the fact that they retained all the ownership for themselves in large part due to the regulations at play that were out of their control.

For example, Uber managing throughout equity would have made things a lot more difficult for them. It would be really complex to manage equity allocations of that scale, but what they get is thousands of people who are aligned with their success, where they have a cooperative rather than an oppositional relationship, which most marketplaces end up with an oppositional relationship, which means the company and the users of their marketplace. That long-term benefit is what creates really healthy, sustainable organizations.

A lot of the DAOs right now, I think that they're not consciously making that trade. They're focused on the short term and some of the aspects of it. They're taking short-term pain and they're not getting the long-term gain, but the long-term-oriented DAOs as the space develops more will have really, really powerful tailwinds behind them. I think we'll see a DAO bear market over the next year or so. I think a lot of the DAOs will not produce meaningful things and will fail to come to fruition.

The DAOs that survive and the DAOs that make it through will probably lapse for the next hundred years because the resiliency they get from the shared ownership and cooperation is so much greater than any corporation could get. I think the average time that a company stays in the S&P 500 has dropped dramatically over the past few decades. I don't recall the exact statistic off the top of my head, but it is far, far shorter than people think. I think that DAOs are far more resilient than companies in the long term even if they're far less efficient than companies in the short term.

Jeremy: I think these are huge experiments in human coordination, capital coordination, work, and it is such a profound space for creativity. It is fascinating to watch. I'm, again, just really grateful to have you guys on for this conversation and really excited about your launch this week, excited to see what people are doing. I'm sure we'll check in and congratulations.

Ian: Thanks, Jeremy. Really appreciate it.

Will: Thank you so much.

[music]

Jeremy Allaire
Co-Founder, CEO & Chairman at Circle
Ian Lee
Co-Founder at Syndicate Protocol
Will Papper
Co-Founder at Syndicate Protocol

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